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Section 14A of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includable in total income - Assessment year 2004-05 Where assessee had invested in shares out of its own funds, no disallowance of interest on borrowed funds could be made under section 14A merely because assessee had also taken loans on which interest was paid [In favour of assessee] The assessee was engaged in the manufacture and sale of cotton yarn. During the assessment, the Assessing Officer disallowed interest on the amount of investment in shares on the ground that since dividend income was exempt from tax, section 14A was applicable. On appeal, the Commissioner (Appeals) reversed the said view and held that section 14A could not apply when the assessee had not made any claim for exemption. Tribunal upheld his order. Held that, the contention raised by the revenue was that even if the assessee had made investment in shares out of its own funds, the assessee had taken loans on which interest was paid and all the money available with the assessee was in common kitty, and, therefore, disallowance under section 14A was justified. In the present case, admittedly, the assessee did not make any claim for exemption. In such a situation, section 14A could have no application. Ms. Urvashi Dhugga for the Appellant. Ms. Radhika Suri for the Respondent. JUDGMENT Adarsh Kumar Goel, J. - The Revenue has preferred this appeal under section 260A of the Income-tax Act, 1961 (in short, "the Act"), against the order of the Income-tax Appellate Tribunal, Chandigarh Bench-B, in I.T. A. No. 613/Chandi/2007, dated November 26, 2007, for the assessment year 2004-05, proposing to raise following substantial question of law : "Whether, in the facts and circumstances of the case and in law, the hon'ble Income-tax Appellate Tribunal was justified in holding that the order of the jurisdictional High Court in the case of CITv. Abhishek Industries Ltd. [2006] 286 ITR 1 (P H) ; 156 Taxman 257 (P H) are not applicable in this case and the disallowance made by the Assessing Officer under section 14A of the Income-tax Act is not as per law." 2. The assessee is engaged in manufacture and sale of cotton…

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